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Bloomberg

WeWork makes $ 9 billion SPAC deal on new path to IPO

(Bloomberg) – WeWork agreed to sell itself to a blank check company to bring the troubled office-sharing startup to the public for nearly two years after a high-profile, failed listing. The agreement will be WeWork with BowX Acquisition Corp. valued at $ 9 billion including debt. In addition, WeWork will raise $ 1.3 billion, including $ 800 million from a private placement with investors such as Insight Partners, funds managed by Starwood Capital Group, and Fidelity Management. New York-based WeWork, co-founded by Adam Neumann and heavily supported by SoftBank Group Corp. was worth up to $ 47 billion two years ago. However, plans for an IPO collapsed in 2019 after investors raised concerns about the company’s business model and Neumann’s leadership style. WeWork’s valuation fell to around $ 8 billion after SoftBank extended a funding lifeline for the startup. The extravagant Neumann, known for both his erratic behavior and innovative vision, was then pushed aside. The coronavirus pandemic continued to weigh on the company’s prospects. WeWork’s business model is to pack large numbers of workers into shared offices, which is an unattractive option for many people during a health crisis. WeWork closed many locations, shed thousands of jobs, and renegotiated leases to survive. Read more: Adam Neumann’s Era of Excess and Eccentricity at WeWork The agreement with BowX leverages a wave of deals with special purpose vehicles or SPACs. to achieve what Neumann couldn’t. Marcelo Claure, Executive Chairman of WeWork and Chief Operating Officer at SoftBank, said in an interview earlier this year that several SPACs turned to WeWork after being shunned by investors for a long time. Josef Schuster, founder and Chief Executive Officer of IPOX Schuster, who launched the IPOX According to the SPAC index, it is rare for a company to go public after an initial failure. Coming to market with a SPAC is really as good as it gets for WeWork to shape this aspired life so that it becomes a big public company down the street, ”said Schuster. The negative press and events surrounding WeWorks’ latest attempt “made it really difficult to raise billions of dollars in the public market, just like a direct and traditional IPO,” he said. “I think the SPAC structure here really works for them.” Schuster said he found the rating “pretty rich” as WeWork is still losing money, but “if they do well it could be a profit stock.” The deal is expected to close in the third quarter of 2021 and has been approved by both boards, according to a statement Friday. The deal was first reported by the Wall Street Journal. WeWork, now led by CEO Sandeep Mathrani, announced in November that its membership and revenue were down in the third quarter compared to the previous quarter. The company left 66 locations and renegotiated lower rents, deferrals or other changes to lease agreements at more than 150 other locations. According to Bloomberg, the company had 542,000 members in 859 locations. The company announced to potential investors that it had lost approximately $ 3.2 billion in the past year, the Financial Times reported earlier this week. The documents also show that occupancy fell from 72% at the beginning of the year before the pandemic broke to 47% in late 2020, the newspaper said. In the January interview, Claure argued that the pandemic was helpful to us. He said the company benefits from the home situation and will continue to do so when people return to work. “This is where WeWork suddenly becomes an incredible value proposition,” he said. “New habits developed during this pandemic.” Mathrani will continue to run the company after the deal. BowX’s Vivek Ranadive and Insight Partners’ Deven Parekh will join the board. BowX Acquisition Corp. is led by Ranadive and Murray Rode, both former TIBCO Software executives and co-founders of the Bow Capital venture company. (Updates with comments in the sixth paragraph.) For more articles like this, visit bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP